ANALYSIS: How markets are rigged against you – by Amanda Lang (CBC News Business – December 9, 2013)

http://www.cbc.ca/news/business

Amanda Lang looks at ways the financial system is rigged in some people’s favour

Every day, trillions of dollars are exchanged by buyers and sellers on trading floors across the world. The places where that happens are colloquially known by the faceless moniker of “the markets” but every time somebody buys a barrel of oil, a shipment of potash, a Royal Bank share or a Japanese yen, there’s a real person behind that transaction.

Historically, the system works because people have confidence in the rules and believe they are treated the same as anybody else. But it’s getting harder and harder to ignore the stories of powerful people cheating the system for their own gain. As the bad apples add up, it gets harder and harder to ignore a troubling realization — “everything is rigged.” That’s what financial journalist Matt Taibbi says in an interview with Amanda Lang airing on Monday night’s The National. After years of reporting on some of the best examples of Wall Street stacking the deck in its favour, Taibbi has concluded that the entire system underpinning the global economy is rigged in some form or another. And it’s not just financial markets that are at stake. The real economy, with factories, services, goods and jobs for real people, is under threat. “There’s a few smaller, inside actors who always seem to win,” he told Lang. “They have more information than anyone else.” Everything from the price of food, to currencies, financial transactions known as “swaps” and interest rates are implicated, he says. “We’ve got a lot of work to get it back to some place where it’s at least close to fair. [Right now] it seems certain people always win and certain people always lose.” Case study: Detroit Detroit’s best known today as a case study in what happens to a declining manufacturing base. But the city was also home to a type of financial fakery that’s becoming all too common. Investment bank Goldman Sachs has been accused of creating an artificial shortage of aluminum by buying warehouses in the city to store the metal, and then intentionally causing delivery delays to create artificial profits. Through a subsidiary, Goldman owns 27 warehouses around the city, housing 1.5 million tons of aluminum, for customers who pay to store it there. The longer it’s there, the longer Goldman can charge its customers. But some started to complain that Goldman was making money by shuffling the metal between its warehouses — instead of out to its owners — and charging them more rent in the process. The story drew the eye of New York Times journalist David Kocieniewski. For the rest of this article, click here: http://www.cbc.ca/news/business/how-markets-are-rigged-against-you-1.2456677

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